How to Inherit a 401(k) Account
Inheriting property is not as glamorous as it sounds. It is often as much work to gain possession of the property as it would be to earn an equal amount of money through employment. If you inherit a real estate property, you must pay property taxes on it, and you are responsible for all the work of maintaining it, whether you live in it or rent it out. If you inherit money from a family member’s estate, you only get what is left after the probate court orders the estate to pay some of it to satisfy creditor claims. This is why estate planning lawyers so often emphasize the importance of non-probate assets. These assets are easier to inherit than property that goes through the decedent’s estate under the watchful eye of the probate court, but some non-probate assets are lower stress than others. The procedures for inheriting a 401(k) account depend on who, if anyone, the original owner of the account designated as a beneficiary, and beneficiaries have several options for getting the money from a 401(k) account they have inherited. To find out more about the afterlife of 401(k) accounts inside and outside of probate court, contact a Washington, D.C. estate planning lawyer.
Do 401(k) Accounts Go Through Probate?
If you do not designate a beneficiary on your 401(k) account, the account is a probate asset. This means that, when you die, its balance at the time of your death will become part of your estate. The probate court will give creditors a chance to file claims for your unpaid debts and will repay the debts with funds from your estate. When the estate settles, your heirs will receive the remaining money in the percentage indicated in your will or determined by the laws of intestate succession.
By designating a beneficiary on your 401(k) account, the beneficiary can get the money without waiting for your estate to settle. The beneficiary of a 401(k) account can claim the account or its funds by presenting the original owner’s death certificate to the institution that manages the 401(k) account.
How Does the Beneficiary Get the Money From a Deceased Family Member’s 401(k) Account?
Beneficiaries of 401(k) accounts can withdraw the money in installments or as a lump sum, but in either case, the money counts as taxable income. If the beneficiary is anyone other than the original owner’s surviving spouse, then the deadline for withdrawing all the money is ten years after the original owner’s death. Surviving spouse beneficiaries can withdraw the money whenever they choose, or keep it in the account for as long as they like, even appointing another beneficiary for if the account survives them. A spouse beneficiary can also merge the decedent’s 401(k) account into the spouse’s pre-existing 401(k) account.
Contact Tobin O’Connor Concino P.C. About Inheritance of 401(k) Accounts
A Washington, D.C. estate planning attorney can help you build an estate plan where a family member can easily inherit your 401(k) account. Contact Tobin O’Connor Concino P.C. in Washington, D.C. or call 202-362-5900.
Source:
msn.com/en-us/money/personalfinance/what-happens-to-your-401-k-when-you-die-here-s-what-you-need-to-know/ar-AA1ShAfl?ocid=msedgntp&pc=ACTS&cvid=693f59c52fba4a74825af0c477362558&ei=18
